Question 1

The major opportunity facing firms in fragmented industries is the implementation of strategies that begin to consolidate the industry into a smaller number of firms.

Accepted Answer

By consolidating the industry, firms can increase their market share and reduce competition, thereby increasing their profitability.

Question 2

A firm following a niche strategy in a declining industry reduces its scope of operations and focuses on narrow segments of the declining industry.

Accepted Answer

A firm following a niche strategy focuses on narrow segments of the market and tries to serve the specific needs of a particular customer group. In a declining industry, a niche strategy can be effective as it allows the firm to reduce its scope of operations and focus on the most profitable segments. By specializing in a particular area, the firm can differentiate itself and create a competitive advantage.

Question 3

Mature industries are characterized by elements such as slowing growth in total industry demand,a slowdown in increases in product capacity,and an overall increase in the profitability of firms in the industry.

Accepted Answer

Mature industries typically experience slowing growth in demand and capacity, but they often face increased competition, which can pressure profitability rather than increase it.

Question 4

If the owner of a jewelry store who normally purchased diamonds from a diamond brokerage firm were to open its own diamond brokerage firm,this would be an example of forward vertical integration.

Accepted Answer

This would be an example of backward vertical integration, as the jewelry store is moving into a previous stage of production by acquiring its supplier.

Question 5

According to Bradenburger and Nalebluff,a firm's competitors help increase the size of a firm's markets while complementors divide this market among a set of firms.

Accepted Answer

According to Bradenburger and Nalebluff, complementors help increase the size of a firm's markets while competitors divide this market among a set of firms.

Question 6

The objective of divestment is to extract a firm from a declining industry.

Accepted Answer

Divestment is a strategy used by firms to exit from a declining industry and focus on core businesses or invest in new and growing industries. By divesting, the firm can free up resources to invest in more profitable businesses, reduce risks, and improve performance.

Question 7

All divestments are caused by industry decline.

Accepted Answer

Divestments can also be due to strategic decisions, such as refocusing on core business or reducing debt, and may not necessarily be caused by industry decline.

Question 8

Firms pursuing a harvest strategy in a declining industry do not expect to remain in the industry over the long term.

Accepted Answer

Firms pursuing a harvest strategy aim to maximize their short-term profits and cash flow while gradually reducing their investment in the declining industry. This is not a sustainable long-term strategy, and the firm does not expect to remain in the industry over the long term.

Question 9

Suppliers are a greater threat to firms in an industry when suppliers are threatened by substitutes.

Accepted Answer

The answer of Suppliers are a greater threat to firms...

Question 10

An emerging industry is an industry in which a large number of small or medium-sized firms operate and no small set of firms has a dominant market share or creates dominant technologies.

Accepted Answer

The answer of An emerging industry is an industry in...

Question 11

Sophisticated software can enhance the value that customers receive from a personal computer.Therefore,software can be said to be a complementor of a personal computer.

Accepted Answer

Software can provide additional features and functions that can enhance the value of a personal computer, making it more attractive to customers. This makes software a complementor to personal computers.

Question 12

If you were to purchase a new Apple iPod and were unable to use your previously downloaded library of digital music with your new iPod,this would be an example of a customer-switching cost you would incur to use Apple's product.

Accepted Answer

Customer-switching cost refers to the cost a customer incurs to switch from one brand or product to another. In this case, if the customer is unable to use their previously downloaded music library on their new Apple iPod, they would incur a switching cost to either repurchase the music or find an alternative device that can play their existing music library.

Question 13

A firm's supplier poses a greater threat if the supplier's industry has a large number of firms,none of which dominate the supplying industry,than if the supplier's industry is dominated by a small number of firms.

Accepted Answer

If the supplier's industry is dominated by a small number of firms, then those firms have greater bargaining power and can set higher prices and/or offer lower quality products or services. If there are a large number of firms in the industry, there is likely more competition which could lead to lower prices and/or higher quality products or services. Therefore, a supplier in an industry dominated by a small number of firms poses a greater threat.

Question 14

First movers that invest only in technology usually obtain sustained competitive advantages,even if they do not tie up strategically valuable resources in an industry before their full value is widely understood.

Accepted Answer

The answer of First movers that invest only in technology...

Question 15

Product innovation is an effort to refine and improve a firm's current processes.

Accepted Answer

Product innovation is an effort to develop new products or services or make significant improvements to existing ones. It involves introducing new ideas, designs, and technologies to create a unique value proposition for customers and gain a competitive advantage in the market. It is not limited to refining or improving an existing process, but rather goes beyond that to drive business growth and success.

Question 16

It is possible for a single firm to be a complementor of one firm and a competitor of another.

Accepted Answer

A firm's relationship with other firms can vary depending on the context and industry. In some cases, a firm may offer complementary products or services to one firm while also competing with another that offers similar products or services.

Question 17

In general,it is rarely the case that all five forces in the five forces framework will be equally threatening at the same time.

Accepted Answer

The intensity of each of the five forces in the five forces framework can vary depending on the industry, market, and other factors. It is rare for all five forces to pose an equal threat at the same time.

Question 18

In an industry,the products or services provided by a firm's rivals meet approximately the same customer needs in the same way as the products or services provided by the firm itself,whereas substitutes meet approximately the same customer needs but do so in different ways.

Accepted Answer

This statement accurately describes the difference between rivals and substitutes in an industry. Rivals offer similar products or services that meet the same customer needs in a similar way, while substitutes offer different options that meet the same needs in different ways.

Question 19

The threat of buyers is greater if the products or services that are being sold to buyers are standard and not differentiated than if the products sold to buyers are highly differentiated.

Accepted Answer

When products or services are standard and not differentiated, buyers have a greater bargaining power as they can easily switch to another supplier offering the same product or service. However, if the products sold to buyers are highly differentiated, there is a lower threat of buyers as they may not be able to find the same unique product or service offered by other suppliers.

Question 20

A fragmented industry is an industry that has experienced an absolute decline in unit sales over a sustained period of time.

Accepted Answer

A fragmented industry refers to an industry that is characterized by numerous small firms with relatively equal market share, rather than being dominated by a few large firms. It does not necessarily have to experience an absolute decline in unit sales over a sustained period of time.

Quiz 2: Evaluating a Firm's External Environment